many stock screeners available; I personally like the Google finance’s stock screener
and screener.in.
3. Macro Trends – Keeping a general tab on the macroeconomic trend is a great way
of identifying good stocks. Here is an illustration of the same – As of today there is a
great push for infrastructure projects in India. An obvious beneficiary of this push
would be the cement companies operating in India. Hence, I would look through all
the cement companies and apply the checklist to identify which amongst all the
cement companies are well positioned to leverage this macro trend.
4. Sectoral Trends – This is sector specific. One needs to track sectors to identify
emerging trends and companies within the sector that can benefit from it. For
example the non alcoholic beverages market is a very traditional sector. Mainly,
three kinds of products are sold and they are coffee, tea, and packaged water.
Hence, most of the companies manufacture and sell just these three products.
However there is a slight shift in the consumer taste these days – the market for
energy drink is opening up and it seems to be promising. Hence the investor may
want to check for companies within the sector that is best positioned to leverage
this change and adapt to it.
5. Special Situation – This is a slightly complicated way of generating a stock idea.
One has to follow companies, company related news, company events etc to
generate an idea based on special situation. One example that I distinctly remember
was that of Cox & Kings. You may know that Cox & Kings is one of the largest and
the oldest tour operator in India. In late 2013, the company announced inclusion of
Mr.Keki Mistry (from HDFC Bank) to its advisory board. Corporate India has an
immense respect for him as he is known to be a very transparent and efficient
business professional. A colleague of mine was convinced that Cox & Kings would
benefit significantly with Mr. Keki Mistry on its board. This alone acted as a primary
trigger for my colleague to investigate the stock further. Upon further research my
colleague happily invested in Cox & Kings Limited. Good for my him, as I write this
today I know he is sitting on a 200% gain
6. Circle of Competence – This is where you leverage your professional skills to
identify stock ideas. This is a highly recommended technique for a newbie investor.
This method requires you to identify stocks within your professional domain. For
example, if you are a medical professional your circle of competence would be the
healthcare industry. You will probably be a better person to understand that
industry than a stock broker or an equity research analyst. All you need to do is
identify which are the listed companies in this space and pick the best based on
your assessment. Likewise if you are banker, you will probably know more about
banks than the others do. So, leverage your circle of competence to pick your
investments.
The point is that the trigger for investigating stocks may come from any source. In
fact, as and when you feel a particular stock looks interesting, just add it to your list.
This list over time will be your ‘watch list’. A very important thing to note here is that
a stock may not satisfy the checklist items at a particular time, however as the time